Gold Analysts Get Most Bullish in a Year After Rout: Commodities

Photographer: Akos Stiller/Bloomberg

Gold slumped 36 percent since reaching a record $1,921.15 in September 2011. Prices will rebound to $1,300 in three months, before declining to $1,110 in a year, Goldman Sachs Group Inc. wrote in a Dec. 5 report. Close

Gold slumped 36 percent since reaching a record $1,921.15 in September 2011. Prices... Read More

Close
Open
Photographer: Akos Stiller/Bloomberg

Gold slumped 36 percent since reaching a record $1,921.15 in September 2011. Prices will rebound to $1,300 in three months, before declining to $1,110 in a year, Goldman Sachs Group Inc. wrote in a Dec. 5 report.

Gold analysts are the most bullish in a year on speculation that investors are reducing near-record bearish bets after the biggest plunge in prices since 1981.

Fifteen analysts surveyed by Bloomberg News expect gold to rise this week, two are bearish and four neutral, the highest proportion of bulls since December 2012. Short positions held by hedge funds and other large speculators jumped almost fourfold from October to Dec. 24 as the bear market deepened, the latest U.S. Commodity Futures Trading Commission data show. Prices rebounded as much as 5.4 percent since slumping to a six-month low on Dec. 31.

The Fall of Gold

Gold retreated for the first time in 13 years in 2013 as an improving economy spurred speculation the Federal Reserve would curb stimulus. More than $73.4 billion was erased from the value of gold-backed funds as some investors lost faith in the metal as a store of value. Bullion rallied as much as 21 percent in two months through August as traders cut short positions and prices that slipped to a 34-month low in June boosted demand for jewelry, coins and bars.

“There is some sense that the market is primed for a short-covering rally,” said Ross Norman, chief executive officer of Sharps Pixley Ltd., a brokerage handling physical bullion in London. “The deeper you push it underwater, the more it’s going to spring back when it does recover. Physical demand at the moment is very robust.”

Gold Prices

Bullion rose to near a three-week high of $1,246.46 an ounce in London today, rebounding from last year’s 28 percent slide. The Standard & Poor’s GSCI gauge of 24 commodities fell 2.2 percent in 2013, while the MSCI All-Country World Index of equities gained 20 percent. The Bloomberg U.S. Treasury Bond Index lost 3.4 percent.

Bullion slipped the past four months and reached $1,182.27 on Dec. 31, within 0.1 percent of the June low. It rebounded since then as some investors closed out bearish wagers, and as physical buyers viewed prices near $1,200 as attractive, HSBC Securities (USA) Inc. wrote in a Jan. 2 report.

The U.S. Mint sold 56,000 ounces of American Eagle gold coins in December, the most since June and contributing to a 14 percent gain in annual sales, data on its website show. Australia’s Perth Mint sold 41 percent more gold in 2013 and Turkey’s imports climbed 64 percent last month to the highest since July, data on the Istanbul Gold Exchange’s website show.

Chinese Demand

Purchases may rise before China’s Lunar New Year festival on Jan. 31, said Mark O’Byrne, a director at GoldCore Ltd., a brokerage in Dublin. The premium to take immediate delivery gold in China was $21.07 an ounce on Jan. 2, compared with an average of $16.21 in December and $10.07 in November, data compiled by Bloomberg show. The nation probably overtook India as the biggest user last year, the World Gold Council has said.

While Chinese demand helped boost prices, the rally may stall above $1,230, Australia & New Zealand Banking Group Ltd. wrote in a Jan. 2 report. Gold’s “downtrend remains in place” as investors continue to sell metal through exchange-traded products, the bank said.

Gold may fall to the lowest since September 2009 based on a point and figure chart, according to technical analysis by Commerzbank AG. A high pole on the chart formed from mid-October to the beginning of November which was followed by a reversal. A 45 degree resistance line also formed from April and both scenarios are bearish, Commerzbank said.

ETP Holdings

Bullion-backed ETP holdings declined every month last year and slipped 79.1 metric tons in December, the most since June, data compiled by Bloomberg showed. They fell to 1,755.6 tons on Jan. 3, the lowest since October 2009. Billionaire John Paulson, the largest investor in the biggest gold ETP, said in November that he personally wouldn’t invest more money into his own gold fund because it’s not clear when inflation will quicken.

Fed officials said Dec. 18 they will trim monthly bond purchases to $75 billion from $85 billion, easing concern about faster consumer-price gains. The program will probably end in December 2014, economists surveyed by Bloomberg last month said. Gold rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system.

Hedge funds and other speculators held 76,052 contracts betting on price declines by Dec. 24, near July’s record of 80,147 contracts, CFTC data show. Their net-long position is 7.2 percent above a six-year low reached on Dec. 3, the data show.

Goldman Sachs

The metal slumped 35 percent since reaching a record $1,921.15 in September 2011. Prices will rebound to $1,300 in three months, before declining to $1,110 in a year, Goldman Sachs Group Inc. wrote in a Dec. 5 report.

Gold will average $1,169 this year, the least since 2009, DZ Bank AG forecast in a Dec. 20 report. Credit Suisse Group AG projects an average of $1,180, while Barclays Plc predicts an average of $1,310 this year and $1,190 in 2015.

Six people surveyed last week expect raw sugar to rise this week and three were bearish. The commodity lost 16 percent last year for a third annual decline and was at 16.15 cents a pound on ICE Futures U.S. in New York today.

Thirteen of 17 people surveyed anticipated lower corn prices, with two saying the grain will climb and two neutral. Fourteen of 17 said soybeans will drop and three expect gains. Seven forecast wheat to slide, with three bullish and five predicting little change.

Worst Performer

Corn slid 40 percent in Chicago last year, the worst performer in the S&P GSCI commodities gauge, and traded at $4.26 a bushel today. Soybeans fell 8.3 percent in 2013 and were last at $12.755 a bushel, and wheat traded at $6.1125 a bushel after a 22 percent annual decline that was the most since 2008.

Eight traders and analysts surveyed expect copper to climb this week, seven were bearish and five neutral. Copper for delivery in three months, the London Metal Exchange’s benchmark contract, fell 7.2 percent last year and was at $7,302 a ton.

The S&P GSCI lost 2.2 percent last year, the first drop since 2008. Global economic growth will accelerate to 3.6 percent this year, up from 2.9 percent in 2013 and the most in three years, as Europe rebounds from recession, the International Monetary Fund estimates. Christine Lagarde, managing director for the fund, said Dec. 22 that the group is raising its outlook for the U.S. economy.

“This year, there is growth possibly in the developed and developing world,” said James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees about $340 billion in assets. “What is better for commodities than to have synchronized global growth? It’s going to be a good year for commodities.”

Gold survey results: Bullish: 15 Bearish: 2 Hold: 4 Copper survey results: Bullish: 8 Bearish: 7 Hold: 5 Corn survey results: Bullish: 2 Bearish: 13 Hold: 2 Soybean survey results: Bullish: 3 Bearish: 14 Hold: 0 Wheat survey results: Bullish: 3 Bearish: 7 Hold: 5 Raw sugar survey results: Bullish: 6 Bearish: 3 Hold: 1 White sugar survey results: Bullish: 6 Bearish: 2 Hold: 2 White sugar premium results: Widen: 5 Narrow: 1 Neutral: 4

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.